Securities Corner

The U.S. Supreme Court’s recent decision sheds light on a pathway to challenge the constitutionality of the SEC’s in-house proceedings. In a unanimous decision, the Court concluded that a public accountant could continue to pursue their constitutional challenges against the SEC in federal court, even if such an accountant has not gone through the traditional appeal process mandated by Congress.

Despite the unanimous decision, Justice Thomas’s concurring opinion “express[ed] grave doubts” about the constitutionality of administrative proceedings that exceed the limited scope of the majority opinion. The concurring opinion hints at a fundamental disagreement between the Court’s Justices over the constitutionality of federal administrative proceedings. In a case with circumstantial similarities to the present lawsuit, the SEC has petitioned the Supreme Court to review a Fifth Circuit decision that broadly ruled the agency's use of its in-house court for bringing a securities fraud case as unconstitutional.

This decision will likely decrease the SEC litigated administrative proceedings to a minimum until the Supreme Court rules on the variety if constitutional challenges. The Court’s decision gives defendants a clear and immediate pathway to challenge administrative action and agency authority, which may incentivize the agencies to bring their initial actions in the district court, rather than in-house.

ACCOUNTING CLASS ACTION FILING AND SETTLEMENTS

In the 2022 fiscal year, there was a slight increase in the number of securities class action filings involving accounting allegations. The median filing lag also increased to 24 days, which was the longest in the past decade. Moreover, the total value of settlements increased substantially over 2021, owing to both growths in the volume of settlements and settlement amounts. Here are some key takeaways from the 2022 fiscal year:

There was a total of 51 securities class action filings involving accounting which was an increase of 11% compared to 2021.
The median pre-disclosure market capitalization of issuer defendants was $1.1 billion, the smallest since 2017. While the median pre-disclosure market capitalization of issuer defendants settled in 2022 increased by 111% over 2021.
There were 43 settlements in 2022 which was a 30% increase over 2021. Accounting cases took on average 3.7 years to settle in 2022 which was longer to settle than those in recent years.
Settlement Value increased from $817 million in 2021 to $1.4 billion in 2022, a 67% increase over the prior year, which included three mega settlements. Over the last 9 years there have been an average of four mega accounting settlements per year.

APRIL 2023 NOTEWORTHY ENFORCEMENT ACTIONS FILED

Director/Officer	Role	Company
Michael J. French	Owner	MJF Holdings, LLC / MJF Capital, LLC
William Eric Meek	COO	Celadon Group, Inc.
William B. North	CCO	Wilmington Trust
William Shihara	CEO	Bittrex, Inc.
Jeffrey Hastings	CEO	SAExploration Holdings, Inc.

Director/Officer	Role	Company
Michael J. French	Owner	MJF Holdings, LLC / MJF Capital, LLC
William Eric Meek	COO	Celadon Group, Inc.
William B. North	CCO	Wilmington Trust
William Shihara	CEO	Bittrex, Inc.
Jeffrey Hastings	CEO	SAExploration Holdings, Inc.

APRIL 2023 NOTEWORTHY SETTLEMENTS AND JUDGMENTS

Amount	Director/Officer	Role	Company
$ 1,311,822.79	Jeffrey Hastings	CEO	SAExploration Holdings, Inc.

Amount	Director/Officer	Role	Company
$1,311,822.79	Jeffrey Hastings	CEO	SAExploration Holdings, Inc.

SUPREME COURT CHALLENGES THE SEC IN-HOUSE PROCEEDINGS

ACCOUNTING CLASS ACTION FILING AND SETTLEMENTS

APRIL 2023 NOTEWORTHY ENFORCEMENT ACTIONS FILED

APRIL 2023 NOTEWORTHY SETTLEMENTS AND JUDGMENTS

Source: U.S. Securities and Exchange Commission